Evaluating Restricted Stock Repurchase Options in Non-Cause Founder Departures
Corporate repurchase options on unvested stock execute at original cost upon non-cause exits, while vested share buybacks require fair market value.
assignment of repurchase rights
Meaning
Contractual provision allowing a company to pass its right to reclaim unvested equity to a secondary party. An assignment of repurchase rights often occurs during a reorganization where a new entity or lead investor takes over the obligations of the original issuer. This transfer ensures that the mechanism for managing unvested shares remains active even if the primary entity lacks the liquid capital to execute a buyback.
It stops applying once the shares in question hit full vesting or the underlying contract expires.
Transfer Logic
Execution starts when a triggering event occurs such as the termination of a founder or early employee. The assignee steps into the shoes of the company, paying the designated price and taking ownership of the reclaimed stock. This process costs the assignee immediate cash while providing the company with a way to prevent equity from sitting with inactive participants.
Stakeholder Impact
Investors frequently demand these terms to protect the cap table from dead equity. When a person leaves the seat before their time is served, the assignment of repurchase rights prevents their departure from diluting the active team. It maintains the concentration of ownership among those still contributing hours and energy to the firm.
Contractual Boundary
Rights generally expire according to the original vesting schedule agreed upon at the start. Once the cliff or monthly milestones pass, the ability to assign the purchase disappears.